The benefits of automated drug and supply cabinets are turning out, in some instances, to be like the health value of oat bran-exaggerated.
Eating oat bran can reduce your risk of heart disease, but its disease-fighting properties aren't as mighty as once believed. Automation is a similar case, some hospital executives said.
For example, a Pyxis Corp. study said Scott & White Memorial Hospital in Temple, Texas, would save $1.5 million over four years, or almost $400,000 annually, using Pyxis' automated supply cabinets. In contrast, the hospital forecast about $75,000 in annual savings, largely due to labor reductions, said Jon Hubble, its director of management engineering.
Nevertheless, Scott & White leases more than 50 Pyxis supply cabinets for 15 nursing units at a cost of about $80,000 a year. It decided the Pyxis supply units would produce valuable information about inventory and supply use, Hubble said.
"We figure if you use the supply units judiciously, they will pay for themselves on a break-even proposition," he said. "But if you had a hospital that was in trouble, that wanted to save a lot of money, this is not going to do it. There were some high expectations for these, and I don't think all those expectations have panned out."
Automated drug and supply cabinets provide secure storage on nursing units. The units often are compared to automated teller machines because a computer logs the entry of access codes and the withdrawal of supplies. It then automatically charges a patient's account for the products.
The primary advantage of the cabinets is the automation of billing and materials tracking, materials managers said. Manufacturers, however, also argue that the cabinets yield significant reductions in drug and supply expenditures by hindering pilferage and encouraging better supply use.
Such cabinets, especially those designed for narcotics, have been popular. Sales at San Diego-based Pyxis, the market leader, grew 24% to $175.6 million in 1995, and it netted almost $36 million on the business. The company also operates a small pharmacy management business, for which it reported $27 million in 1995 revenues.
Pyxis introduced the first automated dispensing system in 1989. Today, at least six companies are vying for sales, although Pyxis has 85% of the market.
The company was a pet project of Columbia Hospital Corp. before it went public in 1992. Earlier this month, it agreed to be acquired by Cardinal Health, a drug wholesaler, in a $920 million stock deal.
The first automated systems targeted narcotics. That made sense because narcotics are dangerous and have a significant resale value. Narcotics also can be costly, so hospitals don't want to forget to charge for their use, even though a shrinking percentage of hospital payments are based on charges.
But "creeping decentralization set in," said Mark Neuenschwander, a consultant in Redmond, Wash., who specializes in automated dispensing devices. Systems were designed for routine medications and disposable supplies.
The financial benefits of the cabinets vary by hospital and the products used. "Somewhere along the line, the law of diminishing returns sets in, and I think that is way sooner than the manufacturers will admit," Neuenschwander said.
"It really is the hospital's responsibility to give due diligence to the vendor's efforts," added Hubble of Scott & White.
One of the problems with the Pyxis study was the fault of Scott & White, he said. It provided the company with a
broad set of supplies on which to calculate savings, instead of just the supplies in the cabinet.
But the methodology Pyxis used to calculate supply savings also was flawed, said Leslie Scholten, a senior management engineer at the hospital.
The company said Scott & White would see supply costs fall 18% because of reduced utilization. Scott & White ran the calculation again with the same formula-and came up with projected savings of 7.4%.
When it looked at what actually happened, the hospital found supply expenditures fell 2% on nursing units with Pyxis supply cabinets. A comparable decline, however, occurred on units that didn't have cabinets.
"Bottom line, we could not validate that the cause of any supply usage reduction was Pyxis," Hubble said.
Moreover, taking full advantage of the system isn't easy, Scholten warned. "We've dedicated a lot of resources to our Pyxis," she said. "It is a big animal."
Hubble and Scholten are scheduled to discuss the Scott & White experience at the Healthcare Information and Management Systems Society meeting March 4 in Atlanta.
Karilyn Perry, vice president of marketing for Pyxis, said she was unfamiliar with the study it performed for Scott & White.
"We are confident that (hospitals) do realize significant savings due to reduction in utilization," Perry said. "That, of course, depends on where within the hospital they are implementing the system, as well as the type of materials management processes and controls they have in place."
Rockford (Ill.) Memorial Hospital was so pleased with the Pyxis drug system, it considered leasing the cabinets designed for supplies. "What we found was that there would not be a payback for supplies," said Stuart Wasilewski, its administrative director of support services.
"You've got to take company claims as being applied across the board," Wasilewski added. "You need to apply their information to what is happening across your facility."
Rockford Memorial already has a sophisticated materials management system, and only a small percentage of its supply charges aren't billed, he said. Those potential charges matter less as more and more patients are covered under negotiated contracts.
Yet, while hospital charges are losing significance, hospital costs are growing more important. Manufacturers and many material managers argue that automated systems are the best way to gather supply costs.
Wasilewski, however, said the development of protocols for product use and guidelines for care are a more fruitful investment. "Knowing what was used is not as valuable as knowing what should be used," he said.
"Everyone is trying to get on the automation bandwagon," he added. "We sometimes ask for things that are inappropriate, the manufacturer provides it, and it really brings no value to the system."